May 16, 2020

Online money transfers: honesty is the best policy, but are you getting a fair deal?

The Advertising Standards Authority (ASA)
Eris
FCA
Helen Scott
3 min
Helen Scott is the CEO ofEris FX. Here shediscusses the evolution of the personal and business FX transfer market, and covers the pressures that will se...

Helen Scott is the CEO of Eris FX. Here she discusses the evolution of the personal and business FX transfer market, and covers the pressures that will see the industry change drastically over the coming months.

 

Online money transfers: honesty is the best policy, but are you getting a fair deal?

Plenty of consumers will be all too familiar with the historically laborious and costly task of sending money abroad.

The outbound UK retail FX transfer market is worth around £60 billion a year, according to a survey carried out by FXCintel on behalf of the Financial Conduct Authority (FCA) in 2018.

Where traditionally, high street banks and traditional providers were the primary way consumers transferred money internationally, recently, online exchange providers have gained significant traction among consumers, by leveraging lower infrastructure costs and new technologies.

The shift to online platforms should in theory have increased transparency for consumers. However, with many providers overcharging customers through hidden charges, inflated exchange rates and even using personal customers to subsidise their business custom, that’s simply not the case. What’s worse, it’s likely thousands of customers are losing money on their transfers without even realising.

The Advertising Standards Authority (ASA) and the FCA have been aware of companies potentially misleading customers with false advertising or incorrect rates. This has led to a handful of well-known firms having complaints upheld against them.

In 2015 the ASA ruled that the widespread use of website “currency converters” by online FX providers, including many of the largest ones, was potentially misleading. This was because the interbank rate they returned could not be achieved. The FCA agreed, it stepped in and by 2018 they were all but gone.

However, instead of replacing the potentially misleading prices with meaningful information, many firms have chosen not to give any upfront pricing at all.  They often advertise their services as having ‘no fees’ or even as ‘free international currency transfers’, but potential customers are not told the actual cost of the transaction until after they have provided contact information or, in some cases, registered.  This makes it very difficult for potential customers to shop around and compare providers.  

For a while, neither authority had enough power to put a halt to the malpractice all together. Until 2018, when the FCA was granted new powers by HM Treasury to try to tackle the issue at industry level rather than firm by firm, as it had previously done. It has now produced a recommendation paper, 19/3: General standards and communication rules for the payment services and e-money sectors.

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The mission of these new rules, that are due to come in on the 1st August, is to ensure good price disclosure and more competition based on price. Its rules and guidance are designed to require providers to ensure that their communications are accurate, balanced and do not disguise, diminish or obscure important information. 

A company that goes by the same name as the Greek goddess of disruption, Eris FX, has made it its mission to champion transparency and bring about change to the industry, empowering consumers with information to allow them to make an informed decision.

International payments specialists Eris FX is already leading the way; by displaying live rates online that update by the second, customers considering a money transfer with Eris FX can clearly see the rate they’re getting compared to the interbank rate, their margin and the total amount they would get in their desired currency. 

Eris prides itself in offering its customers a transparent money transfer solution and are welcoming the new rules that are looking to transform the industry with an injection of transparency, to ensure that each and every consumer gets a fair deal up front. 

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Apr 29, 2021

Stripe backs Step - the digital bank for teens

Stripe
Step
onlinebanking
Fintech
Joanna England
3 min
Stripe backs Step - the digital bank for teens
Payments giant Stripe continues it's startup investment streak and has also announced plans to acquire tax software fintech, TaxJar...

The digital payment solutions giant, Stripe, has re-invested in the San Francisco-based teen banking fintech startup, Step. 

The Series C round raised US$100m in capital from a number of backers, including Coatue, TikTok star Charli D’Amelio, actor Jared Leto, and Will Smith’s Dreamers VC, for the enterprise. 

Step provides a free FDIC-insured bank account and Visa card to teenagers. The accounts are backed by Evolve Bank and there is no subscription charge for its usage. Users don’t pay for their accounts and there are also no overdraft fees. 

The mobile banking app enables parents to set controls and limits on spending and encourage responsible finances. According to data released by the company, 88% of the platform’s users say this is their first bank account. 

Big backers

To date, Step has seen great success in the marketplace. The company has raised more than $175m from investors and now has 1.5m users.

Stripe, which was founded by Irish brothers Patrick and John Collison, previously led Step’s $22.5m Series A round in 2019.

Step's Series B funding round also brought in $50m, and has a distinctly celeb-tinged reputation with investors including Justin Timberlake and the pop duo The Chainsmokers.

Users get access to a free, FDIC-backed bank account, a spending card and P2P payments platform to send and receive money instantly.

CJ MacDonald, chief executive of Step, said the company is aiming to improve the financial futures of the next generation. “Step is the only banking platform that enables teens to start building a positive credit history before they turn 18 and does not charge fees of any kind.

He has previously spoken about the importance of financial literacy for young people. “Money is just one of those things where I think the more educated and equipped you are early, the better decisions you can make down the road,” he told PYMNTS. “And you can also prevent yourself from making costly mistakes. I mean, the average American doesn't have $400 in emergency savings and pays $350 a year in banking fees. If we can help this next generation just ultimately be smarter and more educated as it pertains to money, I think we'll all be better off.”

Kyle Doherty, managing director at General Catalyst and Step board member, explained, “Gen Z is flocking to modern financial solutions that can be easily embedded within their digital lives and Step has a unique model for how to do this right.”

TaxJar acquisition

The news follows on from Stripe’s recent announcement that it plans to acquire TaxJar. The fintech, which builds software for online businesses that automates the reporting and filing of sales taxes, will most likely be integrated with Stripe’s billing services.

Currently, No terms have been disclosed but the Boston start-up had raised more than $60m from investors including Insight Partners.

Stripe chief financial officer Dhivya Suryadevara said of the move, “With TaxJar, we will help millions of internet businesses running on Stripe with their sales tax and make it easier for them to sell internationally.”

Stripe also recently closed a $600m funding round that valued the TaxJar at $95bn and has been investing heavily in fintech startups, including Ramp and Check

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